| Item 1.01. |
Entry into a Material Definitive Agreement. |
On June 17, 2021, frontdoor, inc. (the “Company”) entered into a refinancing amendment (the “Amendment”) to its existing Credit Agreement, dated as of August 16, 2018, among the Company, as borrower, JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent, and the lenders and agents party thereto from time to time (as amended from time to time prior to the effectiveness of the Amendment, the “Existing Credit Agreement” and as amended by the Amendment, the “Amended Credit Agreement”). The Amended Credit Agreement permits borrowings and other extensions of credit in aggregate principal amount of up to $890,000,000 (as may be increased in accordance with the terms of the Amended Credit Agreement) and consists of a five-year $250,000,000 revolving credit facility, a five-year $260,000,000 “term A” loan and a seven-year $380,000,000 “term B” loan. The refinanced credit facilities established pursuant to the Amendment will replace a $250,000,000 revolving credit facility that was scheduled to mature on August 16, 2023 and a “term B” loan facility with an initial aggregate principal amount of $650,000,000 that was scheduled to mature on August 16, 2025. JPMorgan is the administrative agent under the Amended Credit Agreement, and the remaining commitments and loans thereunder are provided by a syndicate of financial institutions. The Amended Credit Agreement contains substantially similar terms, including representations and warranties and affirmative and negative covenants, as the Existing Credit Agreement, as well as a financial covenant for the benefit of the lenders under the revolving credit facility and the “term A” loan facility, which requires that the Company maintain a consolidated first lien leverage ratio not to exceed 3.50:1.00 or, in certain circumstances following a material acquisition, 4.00:1.00, and certain other changes as have been agreed to by the Company and the lenders pursuant to the Amended Credit Agreement. The interest rates and commitment fees applicable to borrowings and commitments under the Amended Credit Agreement are as set forth below.
The interest rate under the Amended Credit Agreement is variable and, barring certain events of default, is determined at the Company’s option as: (i) the sum of (a) the greatest of (1) JPMorgan’s prime rate, (2) the greater of the federal funds effective rate and the overnight bank funding rate plus, in each case, 0.50%, and (3) the one-month London Interbank Offered Rate, subject to certain adjustments (“LIBOR”) plus 1%, and (b) a variable margin rate (the “ABR Margin”); or (ii) LIBOR plus a variable margin rate (the “LIBOR Margin”). In addition, a facility fee is assessed on the unused commitment amount under the revolving credit facility under the Credit Agreement. The ABR Margin, LIBOR Margin and the facility fee with respect to revolving facility loans and “term A” loans are based upon the Company’s current first lien leverage ratio. Under the Amended Credit Agreement, (i) for revolving facility loans and “term A” loans, the ABR Margin ranges from 0.50% to 1.00%, the LIBOR Margin ranges from 1.50% to 2.00%, and the facility fee (with respect to the revolving facility only) ranges from 0.20% to 0.30% and (ii) for “term B” loans, the ABR Margin is 1.25% and the LIBOR Margin is 2.25%.
Consistent with the Existing Credit Agreement, the Company’s obligations under the Amended Credit Agreement are guaranteed by certain specified subsidiaries of the Company, and the Amended Credit Agreement contains customary affirmative and negative covenants. Among other things, these covenants restrict the Company’s and certain of its subsidiaries’ ability to incur liens on certain assets, make material changes in corporate structure or materially alter the nature of its business, dispose of material assets, engage in mergers, consolidations and certain other fundamental changes, or engage in certain transactions with affiliates. The Amended Credit Agreement contains customary default provisions, including, but not limited to, failure to pay interest or principal when due and failure to comply with covenants.
Certain lenders under the Amended Credit Agreement and/or their affiliates may have other business relationships with the Company involving the provision of financial and banking-related services, including cash management, loans, foreign exchange contracts, letters of credit and bank guarantee facilities, investment banking and trust services.
The foregoing description of the Amended Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment and the Amended Credit Agreement, which is filed as Exhibit 10.1 hereto and is incorporated by reference herein.
